Some lenders sidestep Oregon’s foreclosure mediation

Oregon’s foreclosure mediation law seeks to put homeowners and lenders in the same room, exploring any option to avoid the worst-case scenario of a forced eviction.

But smaller lending institutions are increasingly sidestepping the law, first passed by the Oregon Legislature in 2012 and revamped earlier this year. Many institutions are taking advantage of a clause that allows smaller banks and credit unions that initiated 250 or fewer foreclosures the previous year to forgo the mediation process altogether.

Since August, lenders have filed 187 requests with the state to exempt a pending foreclosure from the mediation program, according to Oregon Department of Justice figures.

Institutions like Sterling Savings Bank, Umpqua Bank, SELCO Community Credit Union and Oregon First Community Credit Union have all filed exemption requests this year.

Bank of the Cascades applied for an exemption in 2012.

“Regarding the number of exemption claims, we’re not surprised,” Department of Justice spokesman Michael Kron said.

After all, he said, the mediation law was implemented following a wave of foreclosures spearheaded mainly by the country’s five largest banks — Bank of America, Wells Fargo, JPMorgan Chase, Citibank and Ally Bank. They hold up to 70 percent of the nation’s mortgages.

Each has initiated far more than 250 foreclosures around Oregon throughout the housing crisis. In Bend alone, the five banks initiated nearly 1,400 foreclosures between 2008 and 2011, according to DOJ numbers.

“I think the Legislature had reasons for setting the (exemption) level where it is,” Kron said. The mediation program “wants to capture lenders who have more experience doing a higher volume of these foreclosures.”

Set up in July 2012, the first version of the mediation program applied only to pending foreclosures started outside of local courts, called nonjudicial foreclosures.

Lenders responded by shifted all their pending cases to local circuit courts to avoid participating.

The shift brought active foreclosure cases to a halt across Oregon. State housing officials, hoping to see hundreds of mediation cases, were disappointed after just 21 mediation sessions were scheduled in the program’s first year.

By almost any measure, the program has made strides since then, although the number of concluded mediation conferences remains low.

Since the program was relaunched in August, 20 sessions have concluded, with seven resulting in an agreement to avoid foreclosure and four resulting in loan modifications. The state has 143 sessions scheduled for December and 88 for January.

“We’re happy with the numbers,” Kron said.

But for smaller lenders, sitting in mediation just isn’t necessary, according to Paul Cosgrove, a lobbyist for the Oregon Bankers Association.

He said some of those community banks, with far smaller portfolios than national and regional institutions, meet one-on-one with distressed clients anyway.

Adding the state requirement to their own policies would only keep bad loans on their books for longer.

“Every kind of mortgage lender has their own program, often ones that have been in place for years for working with distressed homeowners,” Cosgrove said.